National Pension System for NRIs

Updated: Aug 28, 2019

NPS(National Pension System) is a retirement pension scheme of Government of India. Every Indian should be aware of the benefits of NPS. Not all company offers pension to their employees so it is advisable that every individual should take care of their pension needs. NPS gives immediate tax relief upon investment in NPS even some portion of withdrawal is tax free.

Currently NRIs population is more than 13 million so here I am going to talk about the NPS for NRIs.All NRIs should know that they can open NPS account. Here I am not going to talk about the benefits of NPS in detail. You need to watch my other video for detailed information about NPS.Here I am going to provide you some key highlights of NPS and Steps to open NPS account for NRIs.Let’s start with some key reason, why NRI’s should open NPS account. This list is based on my understanding and not the exhaustive list. You can get more details from the PFRDA website.

Income Tax Saving under section 80CCD (1), 80CCD (1B), 80CCD (2) - It is possible to save income tax from three sections of income tax rule. So if NRI is having income from Indian salary, house property, rental payment, income from capital gains, income from other resources etc. they must check the tax benefits from NPS before considering any other option.

Investment Choices - In general, there are restrictions to NRIs on financial market transaction, however, NPS provides diversified portfolio. Contribution in NPS goes to Equity (E) asset class, Corporate Bonds ( C ) and/or Government Securities ( G ).The individual subscriber has a choice of selecting mix (E, C, G) as per his/her risk appetite. So if NRI wants to get the benefits of investing in equity market then they can do it through NPS route.

Fund Choices - The individual subscriber has two choices for the management of his/her fund. Active choice, wherein NRI can decide among three asset classes in which the contributed funds to be invested and their respective proportions. Auto Choice, It is basically a default option wherein based on subscriber’s age, the system automatically allocates the percentages to different asset classes.

Retirement Life in India - If you are considering to live retirement life in India then NPS is very good option to get the monthly pension.

Low Cost, Attractive Return, Flexible – When comparing the cost of NPS with other scheme or other means of market investment, cost in NPS is low. India is progressing in all areas and offering attractive returns on investment So NPS.NPS is flexible, it gives an option to change the fund house even changing of asset allocation also.

Now let’s see the important criteria –

Age - NPS is open to any NRI between the age of 18 to 65 years but they should comply with KYC norms.

Resident Status - PIOs and OCIs are not eligible to open NPS account.

Source of Contribution - For NRIs source of NPS contribution could be NRE account, NRO account

Minimum Contribution- Minimum contribution at the time of NPS account opening is Rs. 500/- and then for each subsequent contribution is also Rs. 500/-.Minimum contribution per year is Rs 6000/-

Exit & Withdrawal Rules - Exit & withdrawal rules are similar. In simple term, during retirement, 60% of the corpus can be withdrawn and 40% should go to annuity plan. You can check my other videos for partial withdrawal and early exit rule.

NPS registration can be done in online and offline mode. Let’s first look at the new registration through online mode.· Go to https://enps.nsdl.com website and click on REGISTRATION. In Registration page choose appropriate options.